[Federal Register Volume 87, Number 44 (Monday, March 7, 2022)]
[Notices]
[Pages 12756-12758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94335; File No. SR-EMERALD-2021-38]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To Amend Exchange 
Rule 531 To Provide for a New Service Called the High Precision Network 
Time Signal Service

March 1, 2022.

I. Introduction

    On November 19, 2021, MIAX Emerald, LLC (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend Exchange 
Rule 531, Reports and Market Data Products, to provide for a new 
service called the ``High Precision Network Time Signal Service.'' The 
proposed rule change was published for comment in the Federal Register 
on December 7, 2021.\3\ On January 19, 2022, pursuant to Section 
19(b)(2) of the Act,\4\ the Commission designated a longer period 
within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\5\ On February 18, 2022, the 
Exchange filed Amendment No. 1 to the proposed rule change.\6\ The 
Commission has received no comments on the proposed rule change. This 
order provides notice of the filing of Amendment No. 1 to the proposed 
rule change, and grants approval to the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 93698 (December 1, 
2021), 86 FR 69301 (December 7, 2021) (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 94000 (January 19, 
2022), 87 FR 3865 (January 25, 2022). The Commission designated 
March 7, 2022, as the date by which the Commission shall approve or 
disapprove, or institute proceedings to determine whether to 
disapprove, the proposed rule change.
    \6\ In Amendment No. 1, the Exchange amended the proposal to 
provide additional detail, clarification, and justification 
regarding the proposed rule change and make a non-substantive change 
to streamline the proposed rule text. Amendment No. 1 is available 
on the Commission's website at https://www.sec.gov/comments/sr-emerald-2021-38/sremerald202138-20116580-268058.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    The Exchange proposes to provide for a new, optional service called 
the ``High Precision Network Time Signal Service'' (``Service''), which 
would enable members to synchronize their internal devices to the same 
time as the Exchange's devices with high precision.\7\
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    \7\ See proposed Rule 531(c); Amendment No. 1, at 4. The 
Exchange states that the proposed Service would be available to all 
members who choose to subscribe, and that any member may discontinue 
its subscription at any time. See Amendment No. 1, at 4 n.4., 14. 
The Exchange also states that it intends to submit a separate rule 
filing with the Commission to propose fees for the Service. See id. 
at 4 n.4.
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    According to the Exchange, the U.S. Government's Global Positioning 
Satellite (``GPS'') clock time signal is the publicly-available 
benchmark that the Exchange and most, if not all, members use to 
synchronize their internal

[[Page 12757]]

primary clock devices.\8\ Typically, a recipient's GPS antenna serves 
as a time signal receiver, which then feeds a primary clock device the 
Coordinated Universal Time (referred to as ``UTC'') \9\ using a 
Precision Time Protocol (``PTP'').\10\
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    \8\ See Amendment No. 1, at 5. The Exchange states that a 
``primary clock device'' is a precision ``parent'' clock that 
provides timing signals to synchronized secondary ``child'' clocks 
as part of an independent clock network. See id. at 5 n.8.
    \9\ According to the Exchange, the term ``Coordinated Universal 
Time'' is defined as the international standard of time that is kept 
by atomic clocks around the world, and is the primary time standard 
by which the world regulates clocks and time. See id. at 5 n.8.
    \10\ See id. at 5. According to the Exchange, ``Precision Time 
Protocol'' is a method used to synchronize clocks through a computer 
network. See id. at 5 n.8.
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    Currently, in terms of the Exchange synchronizing its own devices, 
the Exchange states that its primary clock feeds a time signal to the 
Exchange's timestamping devices within the Exchange's own network and 
provides sub-nanosecond level synchronization using an enhanced PTP 
(``Enhanced PTP'').\11\ This Enhanced PTP time signal is used to 
synchronize the Exchange's capture devices (used to timestamp orders 
and messages as they travel through the Exchange's System) with each 
other at a sub-nanosecond level.\12\
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    \11\ See id. at 6. According to the Exchange, ``Enhanced PTP'' 
is commonly defined as a precision time protocol that is at a sub-
nanosecond level. See id. at 6 n.9.
    \12\ See id. at 6.
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    In terms of members synchronizing their internal devices, the 
Exchange states that many members today attempt to synchronize their 
primary clock devices to the publicly-available GPS time signal by 
receiving this time signal through a GPS-capable antenna.\13\ Members 
can thereby synchronize their primary clock devices to the GPS network 
time to within an accuracy of approximately 30 nanoseconds.\14\ Using 
PTP, members can then synchronize their internal devices to their 
primary clock devices to within a few nanoseconds of one another.\15\ 
Alternatively, some members may use their own Enhanced PTP with their 
primary clock devices to synchronize their timestamping devices at a 
sub-nanosecond level.\16\
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    \13\ See id.
    \14\ See id.
    \15\ See id.
    \16\ In those cases, the Exchange and these members use separate 
Enhanced PTP devices. See id.
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    However, because the Exchange and members independently access time 
signals from the GPS network and synchronize those time signals with 
their own primary clock devices, the Exchange states that measurement 
times of market events by the Exchange and a member may oscillate by 
approximately 30 or more nanoseconds.\17\ This may lead to a member's 
time calculations of how long it took for an order or message to leave 
their systems and reach the intended trading center to err by as many 
as 30 nanoseconds.\18\ According to the Exchange, this discrepancy may 
impair the member's ability to fully understand latencies within their 
own systems and whether they need to adjust their systems or trading 
models.\19\
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    \17\ See id. at 6-7.
    \18\ See id. at 7.
    \19\ See id.
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    The proposed Service would provide members with the Exchange's time 
signal at a sub-nanosecond level, allowing members to synchronize their 
own primary clock devices to the Exchange's primary clock device.\20\ 
The Exchange states that this sub-nanosecond time signal would tell the 
member the Exchange's time at a sub-nanosecond level at a particular 
point in time.\21\ Subscribing members would receive the time signal 
from the Exchange via a 1 gigabit connection that is currently offered 
by the Exchange and used by members and non-members to connect to the 
Exchange's system.\22\ By then employing an Enhanced PTP clock 
synchronization device,\23\ subscribing members could use that time 
signal to synchronize their own primary clock to the Exchange's primary 
clock at the more acute sub-nanosecond level.\24\
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    \20\ See id.
    \21\ See id. at 7. The Exchange states that the proposed Service 
would not include any trading data regarding the member's activity 
on the Exchange or include any data from other trading activity on 
the Exchange. See id. at 10.
    \22\ See id. See also MIAX Emerald Fee Schedule, Section 5, 
System Connectivity Fees. The Exchange states that it does not 
propose to include additional connectivity options or modify 
existing connectivity options as part of this proposal, and that 
members may continue to use their existing methods to connect and 
send orders to the Exchange. See Amendment No. 1, at 10.
    \23\ According to the Exchange, an ``Enhanced PTP clock 
synchronization device'' captures time and coordinates time 
synchronization within a network at a sub-nanosecond level. See 
Amendment No. 1, at 8 n.13. In conjunction with the proposed 
Service, a member's Enhanced PTP clock synchronization device would 
be used to synchronize clocks within the member's own system at a 
sub-nanosecond level, enabling the member to record certain times an 
order or message traveled through and leaves the member's system at 
a sub-nanosecond level. Some members may currently have an Enhanced 
PTP clock synchronization device within their own network. This 
device is not provided by the Exchange. The Exchange states that 
other members that do not currently have an Enhanced PTP clock 
synchronization device would need to acquire one from a third party 
vendor, of which there are several providers. See id. at 8.
    \24\ See id. at 7-8.
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    The Exchange proposes to provide the Service in response to member 
demand for tighter and more accurate clock synchronization options with 
the Exchange's network.\25\ In this regard, the Exchange asserts that 
members may use the proposed Service for several purposes.\26\ First, 
according to the Exchange, the proposed Service would enable members to 
more precisely measure latency between their network and that of the 
Exchange, as it would allow them to better understand the times at 
which an order or message reached certain points when traveling from 
their network to the Exchange.\27\ Second, members may use the proposed 
Service to analyze the efficiency of their network and connections when 
receiving messages back from the Exchange (such as those regarding 
whether an order was accepted, rejected, or executed), measuring 
message traversal times by comparing their message's timestamp to the 
Exchange's matching engine timestamp from Exchange-generated 
acknowledgement messages.\28\ Third, members may then use these 
enhanced latency measurements to better analyze latencies within their 
own systems and better assess the health of their network and that 
their systems are working as intended, and leverage this information to 
optimize their network, models, and trading patterns to potentially 
improve their interactions with the Exchange.\29\ Finally, the Exchange 
states that members may use the proposed Service to assist with 
determining compliance with certain regulatory requirements, trade 
surveillance, and evaluating compliance with certain clock 
synchronization requirements.\30\
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    \25\ See id. at 4-5.
    \26\ See id. at 8.
    \27\ See id.
    \28\ See id. at 8-9. The Exchange states that it sends members 
an acknowledgement message that their order or message was received 
by the Exchange, which includes the time of receipt at a nanosecond 
level. See id. at 9 n.14.
    \29\ For example, according to the Exchange, a member may use 
this information when analyzing the efficacy of their various 
connections and whether a connection is performing as expected or 
experiencing a delay. A member may then decide to rebalance the 
amount of orders and/or messages over its various connections to 
ensure each connection is operating with maximum efficiency. See id. 
at 9.
    \30\ See id.
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    Separately, to enhance the clarity of Rule 531 in light of the 
proposed addition of the Service, the Exchange proposes to amend the 
title of Exchange Rule 531 to include the phrase ``and Services'' so 
that the title would read as ``Reports, Market Data Products and 
Services.'' \31\
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    \31\ See id. at 10.

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[[Page 12758]]

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\32\ In particular, the 
Commission finds that the proposal is consistent with Section 6(b)(5) 
of the Act,\33\ which requires, among other things, that the rules of a 
national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest, and that those 
rules not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \32\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \33\ 15 U.S.C. 78f(b)(5).
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    As discussed above, the Exchange's proposed Service would provide 
members with the ability to improve the degree of clock synchronization 
between their systems and the Exchange's systems. The Commission has 
stated previously that clock synchronization is a critical component of 
today's market structure,\34\ and that it is reasonable to expect that 
finer clock synchronization for market participants will evolve over 
time.\35\ The Commission believes that the finer clock synchronization 
enabled by the proposed Service is consistent with such evolvement and 
advancements in technology, and would provide members with a tool that 
enables them to more precisely calculate and better understand order 
and message latencies. The Commission therefore believes that the 
proposal is reasonably designed to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
consistent with Section 6(b)(5) of the Act. In addition, the proposal 
would promote just and equitable principles of trade and not permit 
unfair discrimination, consistent with Section 6(b)(5) of the Act, 
insofar as the proposed Service would be available to all Exchange 
members.
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    \34\ See Securities Exchange Act Release No. 77565 (April 8, 
2016), 81 FR 22136, 22138 (April 14, 2016) (SR-FINRA-2016-005) 
(Order Approving a Proposed Rule Change To Reduce the 
Synchronization Tolerance for Computer Clocks That Are Used To 
Record Events in NMS Securities and OTC Equity Securities).
    \35\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696, 84785-86 (November 23, 2016) (File No. 4-698) 
(Order Approving the National Market System Plan Governing the 
Consolidated Audit Trail).
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    The Commission also believes that the proposal is consistent with 
Section 6(b)(5) of the Act because it would help protect investors and 
the public interest to the extent that improved clock synchronization 
would enhance subscribing members' ability to comply with regulatory 
requirements and perform trade surveillance. In addition, the proposed 
revision of Exchange Rule 531's title to ``Reports, Market Data 
Products and Services'' should help market participants understand what 
is set forth in the rule, consistent with the Section 6(b)(5) goal of 
protecting investors and the public interest.

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-EMERALD-2021-38 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. SR-EMERALD-2021-38. The file 
numbers should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make publicly available. All submissions 
should refer to File No. SR-EMERALD-2021-38 and should be submitted on 
or before March 28, 2022.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice of the amended proposal in the 
Federal Register. In Amendment No. 1, the Exchange amended the proposal 
to provide additional detail, clarification, and justification 
regarding the proposed rule change and make a non-substantive change to 
streamline the proposed rule text. Amendment No. 1 adds clarity and 
justification to the proposal, and does not alter the proposed Service 
functionality from what is set forth in the Notice, which was subject 
to a full comment period. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Act,\36\ to approve the proposed 
rule change, as modified by Amendment No. 1, on an accelerated basis.
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    \36\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\37\ that the proposed rule change (SR-EMERALD-2021-38), as 
modified by Amendment No. 1, be, and hereby is, approved on an 
accelerated basis.
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    \37\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
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    \38\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-04674 Filed 3-4-22; 8:45 am]
BILLING CODE 8011-01-P


